Are the files physically stored on your local drive when you clone a repository? Or are 'pointers' to the files stored on your local drive? It's only when you access the files that the pointers go out and pull the physical files from the Git Repository.

Yes, when you clone a repository the repository is physically cloned. You can restrict the clone to only the commits reachable
from the selected branches. But most often you just clone all since having the complete history has the advantage that
you can work locally which is faster and allows to continue working offline. You only need a network connection to the
server in order to fetch or push changes.